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EU Competition Law, Data Protection and Online

Platforms
Data as Essential Facility

Summary of PhD thesis

Inge Graef

PhD degree obtained on 29 June 2016 at KU Leuven, Belgium

Monograph published by Kluwer Law International in its International Competition Law Series
in October 2016 (see here)

Electronic copy available at: https://ssrn.com/abstract=3635378


1 Focus
RISE OF THE DIGITAL ECONOMY - The digital economy has brought about new market
developments that have impacted society as a whole. Online services bring many benefits to
consumers in the form of new types of social interaction and other innovative functionalities. At
the same time, the use of digital processes has enabled market players to increase their
productivity, resulting into lower prices and intensified competition in many sectors. The advent
of the digital economy also transformed commercial behaviour and led to new business models.
While digitisation continues to contribute to a dynamic evolution of markets, concerns are
increasingly raised about the alleged powerful market positions of a number of key players.1

WELFARE EFFECTS OF DATA COLLECTION AND USE - The significance of data for digital markets
and digital business models plays a key role in this regard. Innovative products and services are
now offered online, which enables providers to collect information about the profile, behaviour
and interests of users. The knowledge that can be extracted from this data forms the basis for the
competitiveness and growth of individual players in digital markets. Datasets built on the basis
of the information that individuals disclose when using online services have become an
economic asset in the digital economy.2 In general, the increasing collection and use of data has
positive welfare effects. The greater knowledge about the interests of users may lead to better
quality of services and enable companies to cut costs, for example, because of more precise
advertisement targeting possibilities. However, the increased collection and use of data can also
result in negative welfare effects. In particular, having control over and being able to analyse
large volumes of data may form a source of power for incumbent market players.3

ROLE OF COMPETITION LAW - It is instructive to note that as early as 2010 Tim Berners-Lee,
known as the inventor of the world wide web, identified several trends that in his view threaten
the internet as we know it. One of the threats he referred to concerns the walling off by large
social networking sites of information posted by users from the rest of the web. By assembling
information disclosed by users into databases and reusing the information to provide value-added
services only within their own sites, providers create closed silos that may, in the view of
Berners-Lee, lead to the fragmentation of the web and threaten its existence as a single, universal
information space.4 Such developments also raise questions about the role of competition law in
addressing potential forms of abuse of dominance relating to data. In this regard, the Competition
Commissioner recognised in a January 2016 speech that there is scope for competition

1
MONOPOLKOMMISSION, ‘Competition policy: The challenge of digital markets’, Special report No. 68, July 2015,
par. S3 and S4, available at http://www.monopolkommission.de/images/PDF/SG/s68_fulltext_eng.pdf.
2
WORLD ECONOMIC FORUM, ‘Personal Data: The Emergence of a New Asset Class’, January 2011, available at
http://www3.weforum.org/docs/WEF_ITTC_PersonalDataNewAsset_Report_2011.pdf.
3
MONOPOLKOMMISSION, ‘Competition policy: The challenge of digital markets’, Special report No. 68, July 2015,
par. S3 and S10.
4
T. BERNERS-LEE, "Long Live the Web: A Call for Continued Open Standards and Neutrality", Scientific American
December 2010, vol. 303, no. 6, (80).

Electronic copy available at: https://ssrn.com/abstract=3635378


enforcement in cases where only a few companies control the data needed to satisfy customers
and cut costs because this could give them the power to drive their rivals out of the market.5

ESSENTIAL FACILITIES DOCTRINE - Against this background, the thesis explores how existing
competition tools and concepts can be applied to data-related competition concerns in digital
markets. The key focus of the thesis is on potential refusals of dominant firms to give access to
data on online platforms such as search engines, social networks and e-commerce platforms.
Even though the analysis may also be applicable to other online services, particular attention is
paid to the three latter types of online platforms because of the importance of data for their
business models and the fact that they are commonly referred to as ‘gatekeepers’ of the internet.
In line with its significance in the digital economy, data is becoming a necessary input of
production for a variety of products and services competing with or complementary to the
services offered by incumbent providers of online search engines, social networks and e-
commerce platforms. By refusing to share information with potential competitors or new
entrants, incumbents may limit effective competition to the detriment of consumers. In this
context, the question rises whether the denial of a dominant firm to grant competitors access to
its dataset could constitute a refusal to deal under Article 102 of the Treaty on the Functioning of
the European Union (TFEU) and lead to competition liability under the so-called ‘essential
facilities doctrine’. This doctrine attacks a particular form of exclusionary anticompetitive
conduct by which a dominant undertaking refuses to give access to a type of infrastructure or
other form of facility to which rivals need access in order to be able to compete.

MAIN RESEARCH QUESTION - The main research question of the thesis revolves around the issue
of whether and to what extent data may constitute an essential facility. While scholars have
pointed to the probability of competitors asking access to data stored on online platforms,6 it is
not clear how an obligation of dominant firms to give access to the data on their platforms would
fit with earlier decisions and judgments. The essential facilities doctrine has in the past been
applied to physical infrastructures, including ports and tunnels, as well as to intangible assets
protected by intellectual property rights. Because of the particular nature of data collected by
providers of online platforms and the new business models that are employed, potential refusals
to share data give rise to new competition concerns and may require a different analysis under
the essential facilities doctrine. By relying on a variety of approaches, the thesis contributes to
academic and policy discussions about how data-related competition concerns should be
addressed under competition law.

5
Speech of Competition Commissioner Vestager, ‘Competition in a big data world’, DLD 16 Munich, 17 January
2016, available at https://ec.europa.eu/commission/2014-2019/vestager/announcements/competition-big-data-
world_en.
6
D.S. EVANS, "Antitrust Issues Raised by the Emerging Global Internet Economy", Northwestern University Law
Review Colloquy 2008, vol. 102, (285), p. 304; C.S. YOO, "When Antitrust Met Facebook", George Mason Law
Review 2012, vol. 19, no. 5, (1147), p. 1154-1158; S.W. WALLER, "Antitrust and Social Networking", North
Carolina Law Review 2012, vol. 90, no. 5, (1771), p. 1799-1800.

Electronic copy available at: https://ssrn.com/abstract=3635378


BROADER ANALYSIS - The focus on the issue of whether and to what extent refusals to give
access to data may constitute abusive behaviour under Article 102 TFEU also enables an analysis
of how existing competition tools for market definition and assessment of dominance can be
applied to online platforms. In addition, the imposition of a duty to share data with competitors
raises questions about the interaction of competition law with data protection legislation,
considering that the information collected by providers of online platforms may also include
personal data of individuals. So even though the thesis mainly deals with the specific question of
how the essential facilities doctrine should be applied to data, a broader analysis of other, related
issues is required in order to give an adequate answer to the research question. This ensures that
the findings have a wider relevance beyond the reach of the essential facilities doctrine and allow
for more general conclusions about how competition law can be adequately applied to new
developments in digital markets.

2 Threefold relevance of data for competition law


ROLE OF DATA IN COMPETITION ENFORCEMENT - Against the background of the emergence of data
as an asset for market players operating in the online environment, the relevance of data for
competition enforcement is submitted to be threefold: (1) by analysing data, an incumbent may
be able to detect trends and changes in consumer preferences enabling it to develop new products
and services possibly giving rise to new markets; (2) data may constitute a necessary input for
products and services to be introduced by competitors of incumbent providers of online
platforms; and (3) as personal data is replacing price as a currency on the internet, theories of
harm relating to price may have to be converted to data. Each of these possible roles of data in
competition law relates to one of the three parts of the thesis. As such, the thesis consists of three
self-standing parts that each have a different angle and approach. Before summarising the
substance of the reasoning in detail in the next sections, the following paragraphs describe the
approach and outline of each part.

APPROACH OF PART I - Part I outlines the economic characteristics of search engines, social
networks and e-commerce platforms, including their multi-sided nature, with the aim of
analysing how relevant markets can be defined and dominance of providers of online platforms
can be assessed. A law and economics methodology is used to this end. Findings from economic
literature about multi-sided businesses are integrated into the analysis of how existing
competition tools can be applied to online platforms. In this regard, guidance is taken from
previous decisions of the European Commission and judgments of the EU Courts as well as, to a
more limited extent, from relevant cases in other jurisdictions. Attention is also paid to economic
literature examining the relationship between competition and innovation, and to business
literature that distinguishes between different types of competition and innovation. In line with
the role of data in identifying possible future products and services for which consumer demand
exists, it is proposed in part I to take a more forward-looking approach to competition analysis in
merger and abuse of dominance cases. In the context of market definition and the assessment of

Electronic copy available at: https://ssrn.com/abstract=3635378


dominance relating to online platforms, it is proposed to consider a form of potential competition
whereby providers do not only compete in the relevant product markets for the specific services
offered to users and advertisers but also in a broader market for data. As such, the thesis
contributes to the start of the art by exploring how the dynamics of online markets can be
adequately reflected in competition analysis.

APPROACH OF PART II - Part II revolves around the issue of whether and to what extent data forms
a necessary input for products and services to be launched by competitors of a dominant online
platform provider. To answer this question, a normative analysis of the essential facilities
doctrine is undertaken resulting in a proposed framework that may lay the ground for a more
coherent application of the doctrine in future cases. Next to refusals to deal, two other potential
competition problems involving access to data and online platforms can be identified, namely
restrictions on data portability and interoperability. Before engaging in an in-depth analysis of
the essential facilities doctrine, attention is paid to these possible competition issues as well as to
the question of whether and to what extent user data as collected by providers of online platforms
is protected under data protection and intellectual property regimes. Even though the analysis
mainly focuses on EU competition law, the development of the essential facilities doctrine under
US antitrust law is also discussed because the concept originated at that side of the Atlantic. In
this regard, relevant EU and US decision-making practice, case law, policy documents and
literature are studied. In addition, by building on the findings from the business literature
analysed in part I, the economic trade-off to be made in refusal to deal cases is discussed. While
this trade-off remains a choice between two valid policy options (i.e. to intervene or not to
intervene), a need for a more coherent application of the essential facilities doctrine that is in line
with the underlying economics can be identified. To this end, insights are drawn from the
economic trade-off which form the principles on which a proposed framework is built for the
application of the essential facilities doctrine more generally. This part of the thesis contributes
to competition law scholarship by engaging in an extensive analysis of the law and economics
behind the essential facilities doctrine. Afterwards, it is analysed how the essential facilities
doctrine can be applied to potential refusals of dominant firms to give access to data on online
platforms. In that context, regard is also had to the role of data as a competitive advantage or
entry barrier in digital markets and to market definition and dominance with respect to data.

APPROACH OF PART III - Because the data to be shared by a dominant provider of an online
platform may also include personal data, possible limitations that data protection legislation puts
to the imposition of a duty to deal under competition law also have to be assessed. In addition,
dominant firms may rely on their obligations under data protection law as an objective
justification for refusing to supply data to competitors. Against this background, the role of data
protection interests in competition enforcement is explored in part III on the basis of a doctrinal
legal research methodology that relies on an analysis of relevant EU legislation, policy
documents, case law and literature in the field of data protection and competition law.
Developments in the decision-making practice of the US Federal Trade Commission and in US

Electronic copy available at: https://ssrn.com/abstract=3635378


legal doctrine are also covered where appropriate. In the light of the value of data as an asset, the
underlying objective of mergers and behaviour of dominant undertakings may be to collect
additional information about consumers. Theories of harm applicable to firms operating in the
digital economy should therefore consider the role of data. When it comes to personal data, not
only the economic value for market players has to be taken into account but also the link with the
right to data protection of individuals as protected by the European Convention on Human Rights
and the EU Charter of Fundamental Rights as well as under EU secondary data protection
legislation. As such, part III analyses whether and to what extent data protection may constitute a
non-price parameter of competition. Furthermore, the more controversial issue of whether
competition enforcement can be used to promote data protection interests is examined. To this
end, the thesis contributes to scholarship by examining the inherent limitations of competition
enforcement as a body of law mainly concerned with economic efficiency are outlined, and by
providing suggestions for better aligning the enforcement of the two regimes in the context of
merger and abuse of dominance cases.

GENERAL OBSERVATION - Before discussing the outcomes of the research more specifically, it is
worthwhile to make one general observation here. What follows from the analysis in each part of
the thesis is that existing competition concepts are still fit for purpose, provided that their
application is adapted to the peculiarities of online platforms. Even though the necessary tools
are available, it is submitted that competition authorities and courts have to be willing to employ
them in such a way as to ensure that the competition analysis reflects the competitive reality of
the markets in which providers of online platforms compete. For each dimension of the threefold
relevance of data to competition enforcement, a lack of willingness can be identified on the part
of the European Commission and the EU Courts to use existing concepts and tools in a way
enabling them to reliably assess possible data-related competition issues. In this context, the
thesis provides recommendations to these institutions in each of the three parts for bringing the
application of competition law in line with the demands of dynamic markets and for adequately
protecting consumer welfare in the online environment. The outcomes of the research in the
three parts and the associated recommendations are now discussed in detail in the next sections.

3 Part I: Competition and innovation on online platforms


SPECIFIC CHARACTERISTICS OF ONLINE PLATFORMS - Part I of the thesis outlines the economic
characteristics of online platforms with the aim of analysing how the existing competition
concepts of market definition and dominance can be applied to online search engines, social
networks and e-commerce platforms. Relevant economic characteristics include the multi-sided
nature of the business models of currently predominant providers and network economy features,
such as economies of scale, network effects, switching costs and entry barriers. Another
peculiarity of online platforms is that due to the fact that services are typically provided free of
charge to users, innovation instead of price is the predominant parameter of competition. While
online platforms raise new challenges for competition enforcement, it is argued that the tools

Electronic copy available at: https://ssrn.com/abstract=3635378


used to define relevant markets and to assess dominance are sufficiently apt to be adequately
applied to these new services.

SEPARATE RELEVANT MARKETS FOR EACH SIDE OF AN ONLINE PLATFORM - With regard to market
definition, the approach of the Commission in the Google abuse of dominance case and the
Facebook/WhatsApp merger to define separate relevant markets for the user and advertiser side
of an online platform seems most appropriate. If only one relevant market for the entire platform
would be defined, it is not possible to consider potential competitive constraints imposed by
businesses that are not active on both sides of the platform but only compete with the provider on
one side. One should note in this regard that multi-sided platforms may also compete with one-
sided undertakings and with multi-sided businesses that have an overlap with the respective
platform on only one side. These forms of competitive pressure can only be taken into account
when defining separate relevant markets for the user and advertiser side of the platform.

DYNAMIC NATURE OF COMPETITION - Because of the fast-moving nature of competition in the


online environment, market boundaries are under a constant rate of change. To reflect the
dynamic process of competition in new economy industries, it would be desirable for
competition authorities and courts to define relevant markets more loosely. Even though the
European Commission and the General Court acknowledged in the Microsoft/Skype merger in
the context of online consumer communications services that potential competition forms a
better indicator of dominance than market shares, such a willingness to apply existing
competition concepts more in line with the dynamic nature of competition cannot be observed
with regard to market definition. Statements made by the Commission in the context of the
Google case and its merger decisions in Microsoft/Yahoo, Microsoft/Skype and
Facebook/WhatsApp indicate that relevant product markets are still defined narrowly on the basis
of the functionality offered to users.

POTENTIAL MARKET FOR DATA - A specific recommendation that has been made in part I in this
regard is for competition authorities and courts to define and analyse a potential market for data
in addition to the narrow relevant product markets for the services provided to users and
advertisers. This would result into a more forward-looking approach to competition analysis. By
considering possible competitive constraints in a potential market for data, the significance of
data for the development of new products and services can be taken into account. In this context,
it is proposed to rely on the existing notion of competition in innovation as developed within the
framework of Article 101 TFEU and to regard user data as a specialised asset in analogy to the
EU Horizontal Guidelines. Even if user data is not traded with third parties and no supply and
demand for data can be identified under current competition law standards, it is submitted that it
would still be desirable for competition authorities and courts to define a potential market for
data in order to make competition analysis more conducive to innovation.

WIDER RELEVANCE OF THE ANALYSIS - The analysis of a potential market does not only seem
desirable for data-related competition issues but also for other cases in the context of digital

Electronic copy available at: https://ssrn.com/abstract=3635378


markets where market players experience competitive pressure beyond relevant markets for
existing products and services. By defining relevant markets narrowly, the Commission
implicitly chooses to favour sustaining innovation within existing markets over disruptive
innovation in new markets. This while market players in the new economy typically compete by
introducing new services instead of by substituting or improving existing services. Such a static
approach therefore risks overlooking potential competitive constraints from related or future
services. This can be overcome by defining a potential market in addition to the specific relevant
product markets. Although this would require competition authorities and courts to define
markets in the absence of supply and demand, existing concepts used in the area of Article 101
TFEU could be relied upon. This way, a more dynamic approach towards competition analysis
can be developed which better reflects the competitive reality of current digital markets.

4 Part II: Data as essential facility


TWO MAIN SCENARIOS - As a new tool for data subjects to exercise effective control over their
personal data in the online environment, the right to data portability as introduced in Article 20
of the General Data Protection Regulation is to be welcomed. This right enables data subjects to
take their personal data with them from one data controller to another when switching services.
While the new right may also impact the level of competition in the market by lowering user
lock-in, potential competitors and new entrants will still have to rely on competition law in order
to get direct access to data (without having to rely on data subjects invoking the right to data
portability) of an incumbent online platform provider. In part II, two scenarios are distinguished
with regard to refusals to give access to data on online platforms.

INDIRECT COMPETITION - The usual scenario in essential facilities cases concerns the situation in
which a market player needs access to an input for a product or service to be launched in a
downstream market in indirect competition with the dominant firm. An example in the context of
online platforms would be the use of data for the introduction of a statistical or analytics service
that does not stand in direct competition to the services that the provider offers to users and
advertisers on its own platform. The PeopleBrowsr v. Twitter case that occurred in the United
States forms an illustration of such a scenario of indirect competition. PeopleBrowsr is a
company that analyses Twitter data in order to sell information to clients about, for example,
consumer reactions to products and services and identification of the Twitter users who have the
most influence in certain communities. Twitter had informed PeopleBrowsr (and several other
third-party developers) that as from 30 November 2012 it would be losing its full access to the
Twitter ‘firehose’, which is the entirety of tweets that are passing through Twitter on a second-
by-second basis. Instead of having direct access to the Twitter data, PeopleBrowsr would have to
approach one of Twitter’s certified data resellers to gain access to the required data.
PeopleBrowsr argued that it needed full firehose access to be able to deliver its services to

Electronic copy available at: https://ssrn.com/abstract=3635378


customers.7 This case concerns the typical ‘leveraging’ behaviour whereby an undertaking seeks
to extend its dominant position in the upstream market, the market for data relating to social
networks or (more narrowly) microblogging services, to the downstream market, the market for
data analytics services, by refusing to give access to the necessary input which in the case at
hand amounted to Twitter’s full firehose data.

DIRECT COMPETITION - The other scenario involves the use of data as an input to launch a form of
direct competition with the dominant firm and to provide a rival search, social network or e-
commerce platform to users and advertisers. Data forms an important input for online services
because it can be deployed as a means to improve, on the one hand, the possibilities of
advertisers to engage in targeted advertising and, on the other hand, the relevance of,
respectively, search results, purchase suggestions and social interactions. The imposition of a
duty to deal would have the effect of enabling an access seeker to compete with the provider at
issue in a direct and horizontal way by introducing its own platform. If an input is regarded as
constituting the upstream market even though it is not marketed independently, a successful
access seeker is able to compete with the dominant undertaking in the only ‘real’ market at issue.

7
PeopleBrowsr, Inc. et al. v. Twitter, Inc. (PeopleBrowsr), No. C-12-6120 EMC, 2013 WL 843032 (N.D. Cal.
March 6, 2013), at 1.

Electronic copy available at: https://ssrn.com/abstract=3635378


Comparing possible scenarios of indirect and direct competition as regards
access to data:

COMPETITION FOR VERSUS IN THE MARKET - In terms of substantive assessment, it is submitted


that competition authorities and courts have to make a trade-off between competition for and
competition in the market when deciding whether to impose a duty to deal under the essential
facilities doctrine. Competition in the market comprises competition on the basis of price and
output in established markets, whereas competition for the market attacks existing market
structures and leads to the development of new markets. Although innovation is a complex
process that may have unpredictable outcomes, competition for the market is generally argued to
provide stronger incentives for disruptive innovation, whereas competition in the market
primarily stimulates sustaining innovation.

TRADE-OFF IN ESSENTIAL FACILITIES CASES - The trade-off to be made in essential facilities cases
amounts to a choice between giving competitors access to the required input, which would
enable them to create products complementary to that of the dominant firm, or denying access as
a result of which competitors would be mainly incentivised to develop substitutes competing
with the product of the dominant firm. While the first option provides stronger incentives for

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Electronic copy available at: https://ssrn.com/abstract=3635378


competition in the market and sustaining innovation, the second option will primarily stimulate
competition for the market and disruptive innovation. Considering that both types of competition
and innovation bring value to society albeit in a different way, the decision to give preference to
one over the other amounts to a policy issue.

NEED FOR MORE TRANSPARENCY - The framework proposed in part II aims to contribute to the
state of the art by providing a way to apply this economic trade-off in practice and to make the
application of the essential facilities doctrine more coherent. Taking the trade-off fully into
account would require a tool that differentiates on the basis of the type of competition or
innovation that is at risk in a particular market situation. The new product requirement is by its
very nature capable of implementing such an exercise under the essential facilities doctrine
because it determines what level of innovativeness the product or service to be introduced by the
access seeker has to bring about. The new product condition requires access seekers to point to a
new product that they would like to introduce once given access to the requested input. Even
though the new product condition forms an adequate tool to make the trade-off between
competition for and competition in the market more transparent in essential facilities cases, the
Commission and the EU Courts have so far been unwilling to explicitly consider incentives for
competition for the market in decisions and judgments. While it is a valid choice of the
Commission and the EU Courts to favour competition in the market, this does not mean that
incentives for competition for the market should be disregarded. In order to make the trade-off
visible, it is submitted that incentives for competition for the market should be openly analysed
in essential facilities cases even if preference is given to competition in the market.

EXTERNAL MARKET FAILURES AS A DETERMINING FACTOR - In this context, an adapted version of


the new product condition is put forward that accounts for differences in market characteristics.
Instead of distinguishing between whether assets are protected by intellectual property law or not
(which is the current trigger for applicability of the new product condition under the essential
facilities doctrine), the proposed framework suggests to let the applicability of the new product
condition depend on whether a market is characterised by external market failures. External
market failures such as the presence of strong network effects and switching costs, which to a
certain extent also characterise the markets in which online search engines, social networks and
e-commerce platforms operate, could make it commercially unviable for competitors to
introduce a new product. If, for instance, consumers are locked-in to a particular standard, a
requirement that access seekers have to introduce a new product is of no relevance because
consumers are not willing to switch to a different system. It is important to note that external
market failures may enable the incumbent to extend its dominance in time irrespective of
whether the requested input is protected under intellectual property law. Since there is no
convincing economic rationale for treating intellectual property rights differently than other
types of assets under the essential facilities doctrine, it is proposed to focus instead on the
presence of external market failures as a way to determine whether the new product condition
should be met for holding a refusal to deal abusive under Article 102 TFEU.

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APPLICABILITY OF THE NEW PRODUCT CONDITION - Considering that a competition intervention
cannot re-establish the race for competition for the market, caution is warranted in markets in
which external market failures are absent. In these markets, the new product condition should be
applied strictly because of the stronger self-correcting mechanism of the market. As a result, a
competition intervention to encourage competition in the market risks unnecessarily lowering
incentives for competition for the market in this situation. Incentives for competition for the
market are best preserved by avoiding government interference in the market and thereby
maintaining the prospect of dominance for new entrants. In markets where external market
failures are present, the new product requirement should be dropped to ensure that access seekers
planning to stimulate competition in the market by introducing sustaining innovations or
products similar to that of the dominant undertaking can gain access to the necessary input. In
these markets, there is a higher risk that the incumbent is able to extend its dominance in time
and to prevent competitors from entering the market and competing on the basis price or quality.
This justifies a wider scope of liability for refusals to deal under Article 102 TFEU. Therefore, if
the market is locked-in due to the presence of strong network effects or switching costs and the
essential facility holder has had a stable dominant position for some time, competition authorities
should be able to impose a duty to deal even if the access seeker is not able to indicate a new
product that it would like to introduce once given access to the requested input. This provided
that the other conditions of the essential facilities doctrine are met that require, respectively:
indispensability of the requested input, exclusion of all effective competition on the downstream
market and absence of an objective justification.

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Existence of external market failures as a determining factor for whether the
new product condition is triggered:
External market failures No external market failures

- Main risk is that dominant firm is - Because of the stronger self-correcting


able to extend its dominance in time - not nature of the market, a competition
because of its competitive success but due intervention to stimulate the process of
to the external market conditions competition in the market is less pressing

- While a competition intervention will - Due to the absence of external market


reduce incentives for competition for the failures, there is more room for other
market and disruptive innovation, such an market players to attack the dominance
effect may be outweighed by the increased of the incumbent by competing on price,
level of competition in the market that quality or output or by introducing
would not have occurred but for the sustaining innovations in the market
intervention

- By intervening, a competition authority - A competition intervention in markets


can prevent that the dominant firm is not characterised by external market
overcompensated for its investments and failures therefore carries a higher risk of
will stop investing in quality or sustaining reducing incentives for competition for
innovations because of the limited level of the market and disruptive innovation
competition in the market

- Overcompensation contradicts the goal of


competition law to guarantee effective
competition and, with regard to inputs
protected by intellectual property law, is
not in line with the rationale of the
intellectual property system either

DISRUPTIONS OF SUPPLY - Apart from absolute refusals to deal, where the requested input has not
been marketed before, another scenario that can be distinguished is that of a disruption of
existing levels of supply. Disruptions of supply have a behavioural element that is absent in
absolute refusals to deal where the ground for competition intervention is more structural and
does not lie in the conduct of the dominant firm but in the fact that it holds an input which is
essential for competition on a downstream market. Yet, the same legal standards have been
applied to absolute refusals to deal and disruptions of supply in Microsoft. While the case
involved a termination of supply of previous levels of interoperability information to Microsoft’s
competitors in the market for work group server operating systems, the behaviour was

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nevertheless assessed by the General Court under the strict essential facilities test set out in the
cases of Magill and IMS Health that dealt with absolute refusals to deal. This may lead to
undesirable outcomes. In particular, the application of the new product requirement to
disruptions of supply has the consequence that downstream competitors who were already active
on the market and have likely made commercial decisions on the basis of the supply, have to
identify a new product that they would like to introduce in the market in order to continue to
have access to the input of the dominant firm. If downstream competitors cannot point to such a
new product that they would like to develop on the basis of the requested input, they have no
cause of action under Article 102 TFEU towards a dominant undertaking that decides to enter the
downstream market itself and withdraws previous levels of supply in order to become the sole
supplier of the downstream product.
PROPOSING A SEPARATE LEGAL TEST FOR DISRUPTIONS OF SUPPLY - To prevent these situations, it
is put forward that disruptions of supply should be assessed under different legal standards than
absolute refusals to deal. As demonstrated by the Microsoft case in which Microsoft was found
to have engaged in a strategy to exclude competitors from the downstream market for work
group server operating systems, a disruption of supply may be used to drive downstream
competitors off the market. It is therefore worth considering if a separate cause of action for
disruptions of supply under Article 102 TFEU can be based on the predatory nature of such
behaviour. In this regard, a comparison can be made with the US where two cumulative
conditions have to be met in order for a refusal to deal to amount to a violation of Section 2 of
the Sherman Act: (1) the monopolist is engaged in a pre-existing voluntary course of dealing,
and (2) the monopolist is willing to forsake short-term profits in order to achieve an
anticompetitive end.8 The willingness of a dominant undertaking to sacrifice short-term profits
by unilaterally terminating a voluntary and thus presumably profitable course of dealing reveals
the predatory character of a refusal to deal and forms a reliable proxy for assessing the abusive
nature of a disruption of supply. A proposed legal test in EU competition law specifically
applicable to disruptions of supply may therefore be based on the US framework.

THREE-STEP FRAMEWORK FOR DISRUPTIONS OF SUPPLY - A first step may involve establishing a
voluntary prior course of dealing for an indispensable input between the dominant undertaking
and the existing customer. If the dominant undertaking has not engaged in a prior course of
dealing on a voluntary basis, the predatory nature of the disruption of supply cannot be
established because there is no presumption that the dominant undertaking profited from the
course of dealing and decided to forego these profits by terminating the business relationship.9 A
second step for determining whether a disruption of supply amounts to a violation of the EU
prohibition on abuse of dominance would involve establishing the anticompetitive nature of the

8
See Verizon Communications v. Law Offices of Curtis V. Trinko, LLP (Trinko), 540 U.S. 398 (2004), at 409.
9
In Trinko, the US Supreme Court argued that in the absence of a voluntary course of dealing ‘the defendant’s prior
conduct sheds no light upon the motivation of its refusal to deal-upon whether its regulatory lapses were prompted
not by competitive zeal but by anticompetitive malice’ (Verizon Communications v. Law Offices of Curtis V. Trinko,
LLP (Trinko), 540 U.S. 398 (2004), at 409).

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termination of the prior course of dealing. In devising a legal test for the assessment of whether a
termination of an existing business relationship is anticompetitive, the case law of the EU courts
on predatory pricing may serve as a source of inspiration. Insights from the Akzo case, in which
the Court of Justice put forward a two-tier approach for assessing predatory pricing conduct
under Article 102 TFEU, can be transposed to the area of disruptions to supply in the following
way. The sacrifice of short-term profits that results from a dominant undertaking’s decision to
disrupt existing levels of supply gives rise to a presumption of a plan or intent to eliminate
competition (first tier) considering that the dominant firm has no interest in terminating the
existing business relationship, except that of eliminating competitors from the downstream
market so as to enable it subsequently to raise its prices to consumers. If the willingness of the
dominant undertaking to forsake short-term profits cannot be established, proof of a plan or
intent to eliminate competition (second tier) or proof of anticompetitive effects (in line with the
Post Danmark I judgment) would be necessary in order to demonstrate the predatory and thus
abusive nature of a disruption of supply under Article 102 TFEU. In a third step, the dominant
undertaking must be given the chance to objectively justify the unilateral termination of its
business relationship with the existing customer. Since the dominant undertaking voluntarily
decided to deal in the past, it will be hard to proof that a disruption of supply is justified.

ROOM FOR A NEW APPROACH - While the European Commission and the General Court expressed
the view that disruptions of supply should not be treated differently than absolute refusals to deal
in, respectively, the Guidance Paper on exclusionary conduct under Article 102 TFEU and the
Microsoft case, the Court of Justice still appears to distinguish with regard to the legal thresholds
applicable to the two types of refusal to deal. The Sot. Lélos v. GlaxoSmithKline case, a
preliminary ruling involving a refusal of a dominant pharmaceutical company to meet orders of
existing customers in full with the aim of restricting parallel trade, does offer room for a different
treatment of disruptions of supply. In its judgment, the Court referred to the Commercial
Solvents and United Brands judgments and not to the Magill and IMS Health judgments in which
the stricter essential facilities test was applied. This may indicate that the Court of Justice still
regards the Commercial Solvents reasoning as the applicable law for disruptions of supply. Since
the Microsoft judgment of the General Court was not appealed, the Court of Justice has not been
given the opportunity to rule on the fact that the lower court applied the stricter essential
facilities test to Microsoft’s termination of the previous level of disclosures of interoperability
information. Its statements in the Sot. Lélos v. GlaxoSmithKline judgment may imply that the
Court of Justice does not agree with the approach of the General Court in Microsoft and is of the
view that the essential facilities test of Magill and IMS Health should not be applied for
determining the abusive nature of disruptions of supply. Instead, disruptions of supply may be
assessed for their predatory character as the three-part test put forward here aims to do.

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Proposed three-step framework for assessing the abusive nature of disruptions
of supply under Article 102 TFEU:

• Voluntary prior course of dealing for an


indispensable input

• Plan or intent to eliminate competition:


- a presumption applies if dominant undertaking sacrifices short-term profits
- if this presumption does not hold, anticompetitive effects have to be
demonstrated

• Absence of an objective justification

DATA AS ESSENTIAL FACILITY - When assessing the abusive nature of refusals to give access to
data, attention has to be paid to the characteristics that set data apart from other assets previously
being considered under the essential facilities doctrine. These features include its inherently non-
rivalrous nature that may, however, be lost when the data is made exclusive by way of contracts
or by protecting it under the sui generis database right and trade secret law, and the possible
personal nature of data as a result of which the EU data protection regime would become
applicable.

INDISPENSABILITY OF DATA - One of the main issues for the application of the essential facilities
doctrine will be to establish the indispensable nature of the requested data. In this regard, the
question has to be answered whether the data is objectively necessary for being able to compete
on the downstream market and whether economically viable substitutes are available. Even
though the statements of the Commission in the Google/DoubleClick,
Telefónica/Vodafone/Everything Everywhere and Facebook/WhatsApp mergers may indicate that
data of incumbents will not easily be considered indispensable for providing targeted advertising
services, this may be different with regard to the use of data for offering services of good quality
on the user side in the form of, for example, the relevance of search results in online search
engines, suggested social network interactions and purchase suggestions in e-commerce
platforms. For the provision of these functionalities to users, a specific type of data is needed that
may not be readily available on the market. For example, if the specific data needed to operate a
search engine of good quality can only be obtained through serving customers, other data that is

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available from third parties will not form an adequate substitute for the search data of the
incumbent search engine provider. With regard to the economic viability of duplication of the
required data, the interventions by the French and Belgian competition authorities in,
respectively, the national energy and lottery markets are instructive.10 Both national competition
cases concerned the cross-use of data developed in the context of a monopoly and therefore do
not have much similarity to a factual scenario centring around data gathered by a provider of an
online platform. Nevertheless, the reference made by both competition authorities to reasonable
financial conditions and a reasonable period of time when assessing the possibility for
competitors to reproduce a database may also be of relevance when assessing the economic
viability of duplication in the context of the indispensability of a dataset under the essential
facilities doctrine in the online environment.

ANSWERING THE RESEARCH QUESTION - As an answer to the main research question, it can be
concluded from the analysis in part II that the essential facilities doctrine can be adequately
applied to potential refusals to give access to data on online platforms as long as the peculiarities
of data are taken into account. Whether new regulation is necessary beyond the application of the
essential facilities doctrine under Article 102 TFEU, is essentially a policy issue. A regulatory
intervention may be considered desirable in situations where horizontal competition in a market
is limited due to external market failures. Reference can be made here to Argenton & Prüfer’s
proposal to require all search engine providers to share data on search queries so that market
players only compete with their algorithms and not on the basis of the information they hold
about previous searches on their platform.11 It would, however, be challenging to adequately
devise such a new form of regulation. Apart from problems relating to the practical
implementation and enforcement of such an obligation, it may prove difficult to establish to
which entities the duty to share data should apply. In this regard, it has to be kept in mind that
search functionality also plays a role in social networks. E-commerce platforms, in their turn, can
be regarded as vertical search engines. As a result, it seems arbitrary to limit the scope of
application of a potential data-sharing scheme to a particular class of market players. In addition,
the expected short-term increase of competition in the market has to be weighed against possible
negative effects of a regulatory intervention on competition and innovation in the long term.
Moreover, there are strong reasons to adhere to the case-by-case assessment under Article 102
TFEU. In particular, the application of the essential facilities doctrine enables competition
authorities and courts to take into account all specific factual circumstances. Since the extent to

10
Autorité de la concurrence, Décision n° 14-MC-02 du 9 septembre 2014 relative à une demande de mesures
conservatoires présentée par la société Direct Energie dans les secteurs du gaz et de l’électricité, available at
http://www.autoritedelaconcurrence.fr/pdf/avis/14mc02.pdf; and Belgian Competition Authority, Beslissing n°
BMA-2015-P/K-27-AUD van 22 september 2015, Zaken nr. MEDE-P/K-13/0012 en CONC-P/K-13/0013,
Stanleybet Belgium NV/Stanley International Betting Ltd en
Sagevas S.A./World Football Association S.P.R.L./Samenwerkende Nevenmaatschappij Belgische PMU S.C.R.L.
t. Nationale Loterij NV, available at http://www.mededinging.be/nl/beslissingen/15-pk-27-nationale-loterij.
11
C. ARGENTON AND J. PRÜFER, "Search Engine Competition with Network Externalities", Journal of Competition
Law and Economics 2012, vol. 8, no. 1, (73), p. 91.

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which data may constitute a competitive advantage or an entry barrier differs depending on the
particular setting, it is difficult to make generalisations about the circumstances in which data
should be shared with competitors. While data may be an important input of production that
cannot be easily duplicated in some scenarios, the assessment may be different in other situations
where data cannot be made exclusive. With regard to possible limitations that data protection
legislation puts to the mandated sharing of data with third parties under Article 102 TFEU, it
should be noted that, in principle, a competition law obligation in itself constitutes a legitimate
ground for processing of personal data under the EU data protection regime. Remaining potential
conflicts between competition and data protection law can be adequately addressed by requiring
the dominant firm to implement appropriate data protection safeguards in the form of specifying
the new purpose of the processing activities, obtaining renewed consent from affected data
subjects or through the anonymisation of personal data.

WIDER RELEVANCE OF THE ANALYSIS WITH REGARD TO MARKET DEFINITION AND MARKET POWER -
Even though part II focuses on refusals to deal as a specific type of behaviour of dominant firms,
several elements of the analysis have a wider relevance. In particular, the way the relevant
market for data is defined and dominance is assessed in essential facilities cases may illustrate
how a competition analysis of a potential market for data in other abuse and merger cases in the
online environment, as proposed in part I, can be undertaken. After the introduction of the
concept of hypothetical or potential markets by the Court of Justice in IMS Health, it is not
necessary anymore for the application of the essential facilities doctrine that the requested input
is already traded as an independent product by the dominant undertaking. In such cases where
the alleged essential facility has not been marketed before, market definition amounts to a
normative decision about how the market should look and does not reflect ‘real’ supply and
demand of products and services. Such a hypothetical or potential market for data, in essential
facilities as well as in other abuse and merger cases, can be defined by looking at the
substitutability of different types of data and in particular at the functionality which can be
offered with a specific set of data as input. In this way, separate relevant markets can possibly be
defined for offline and online data and, as further sub-segmentations within the latter market, for
search, social network and e-commerce data. As regards market power in data, one needs to find
an objective manner to attribute value to data. The turnover generated by a provider through the
monetisation of data by licensing information to third parties, delivering targeted advertising
services or offering other paid products and services to customers on the basis of the collected
data, may form an indication of its competitive strength in a potential market for a particular type
of data. In the absence of any data-related revenues, potential competition may form an adequate
proxy for dominance in relevant markets defined around data.

WIDER POLICY RELEVANCE OF THE ANALYSIS - The relevance of the analysis relating to the
economic trade-off between competition for and competition in the market also extends beyond
the specific setting of the essential facilities doctrine. One could argue that, to some extent,
competition authorities have to make a choice between encouraging competition for or

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competition in the market when determining whether to intervene in a market to remedy other
types of exclusionary conduct under Article 102 TFEU as well. Enforcement actions against
tying or bundling strategies of dominant firms, for example, also have as their objective to
restore competition in the market but may at the same time reduce incentives for competition for
the market by taking away the prospect of dominance for new entrants. In this regard, the
existence of external market failures could also form a guiding principle for determining the
scope for competition liability in other abuse of dominance cases.

5 Part III: Data protection interests in competition enforcement


RISE OF ATTENTION FOR COMPETITION LAW FROM DATA PROTECTION ADVOCATES - Part III of the
thesis revolves around the role of data protection interests in competition enforcement. The
relevance of data protection for competition enforcement started to gain attention in the context
of the Google/DoubleClick merger in 2007 that led to the combination of information from
Google on users’ search behaviour with information from DoubleClick on users’ web-browsing
behaviour. The current interest from data protection advocates in competition enforcement seems
to stem from the concentrated nature of online markets that may reduce possibilities for users to
exercise effective control over their personal data. The application of key data protection
concepts such as consent is difficult in concentrated markets where undertakings may be able to
impose their practices on individuals. One should note, however, that the application of
competition law is only triggered in case of a real, identified competition problem. A high level
of concentration in itself does not form a reason for competition authorities to intervene in a
market.

IMPACT OF DATA PROTECTION REGULATION ON COMPETITION - Considering that differences in data


protection standards among EU Member States may lead to a distortion of competition within the
internal market, the possible role of the new General Data Protection Regulation in achieving a
better level playing field in the EU is worthy of attention. By posing limits to the freedom of
market players to collect and use personal data as they deem fit, data protection regulation may
also have a competitive impact. Even though the new data protection rules are contained in a
Regulation and are therefore directly applicable without the need for national implementing
legislation, the General Data Protection Regulation leaves room for interpretation and additional
legislation at the national level. This may give rise to fragmentation between Member States.
Because of its responsibility in ensuring the uniformity in the application of EU data protection
law, the functioning of the European Data Protection Board (a body at the EU level that brings
together the different national data protection authorities) seems of vital importance in this
regard. The main difference with the enforcement of EU competition law persists under the
General Data Protection Regulation, namely that the European Commission does not have the
competence to act under EU data protection law. While the European Data Protection Board, in
which the Commission is involved without having a voting right, can take binding decisions in
case of disagreement between national data protection authorities, the adoption of the final

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decisions addressed to controllers and their enforcement will continue to take place at the
national level.

DATA PROTECTION AS A NON-PRICE PARAMETER - When considering whether data protection may
constitute a non-price parameter of competition, it is submitted that a difference should be made
between situations in which data protection forms an isolated aspect of quality and situations in
which data protection correlates with price and other aspects of quality. In the latter case, it is not
desirable to regard data protection as a dimension of quality in competition analysis because a
stronger level of data protection is not necessarily valued by all consumers. This is particularly
the case for online search engines, social networks and e-commerce platforms where the level of
data protection, on the one hand, and the (absence of a) price as well as the relevance and
personalisation of the services, on the other hand, are traded off against each other. Data
protection can still be integrated in competition analysis as a non-price parameter of competition
in these industries by treating it as a form of consumer choice or product variety instead of as a
dimension of quality.

CURRENT RELUCTANCE TOWARDS THE INTEGRATION OF DATA PROTECTION INTERESTS - While data
protection can be integrated as a non-price parameter of competition in the usual competition
analysis if it is a key dimension of competition in the market, a more controversial question is
whether data protection should be protected as a non-efficiency concern under competition law.
Despite calls from data protection advocates for a greater role of data protection considerations
in competition cases, the European Commission and the Court of Justice have so far been
reluctant to integrate data protection into competition analysis as a non-efficiency concern. In
Asnef-Equifax, the Court of Justice stated that issues relating to the sensitivity of personal data
are not a matter for competition law as such. In its Google/DoubleClick and Facebook/WhatsApp
merger decisions, the Commission made clear that its analysis was without prejudice to the
obligations imposed on the parties by data protection legislation and that privacy-related
concerns do not fall within the scope of EU competition law.

PROPOSED THREE-LAYER APPROACH - Considering the status of data protection as a fundamental


right in the EU legal order as protected by the EU Charter of Fundamental Rights, it is submitted
that data protection deserves greater consideration in competition analysis than the way the
Commission has occasionally addressed other non-efficiency concerns in competition cases. In
this regard, a three-layer approach is put forward for integrating data protection interests in EU
competition law. First, by adopting remedies to address economic efficiency concerns,
competition enforcement may at the same time achieve results that also foster data protection
interests. For example, by blocking a merger or by imposing merger remedies to address
economic efficiency concerns, a competition authority can also prevent that personal data is
processed for incompatible purposes (a key data protection principle) after the merger. Second,
competition authorities are under a negative duty to respect the right to data protection in terms
of procedural safeguards to be followed in competition investigations and as regards the
substance of competition law measures that can be adopted (for instance for data access). Third,

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competition authorities are subject to a positive duty to promote the application of the right to
data protection in line with Article 51(1) of the EU Charter of Fundamental Rights in cases
where a breach of the competition rules is identified. While competition authorities cannot and
should not use their competences to promote data protection interests if no violation of the
competition rules can be found, there is scope for the Commission to take a more proactive
approach in particular in the context of merger and commitment proceedings. In these cases,
undertakings find themselves at the mercy of the Commission to approve a merger or to abstain
from adopting a prohibition decision for a breach of Article 101 or 102 TFEU. This position
gives the Commission room to demand measures that do not only end the competitive harm
identified and restore competition but also facilitate the effectiveness of the right to data
protection in a way that might otherwise not have been possible under EU data protection law.

Three-layer approach towards integrating data protection interests in EU


competition law:
Comparison with Character of the obligation Effect on the
other non- incumbent on the European application of
efficiency concerns Commission as a competition law
competition authority
Data protection Protection of economic efficiency In accordance with the
treated as any other also furthers data protection inherent limitations of
non-efficiency concern interests competition law
Special status of data Negative duty to respect the right Right to data
protection as a to data protection: protection imposes
fundamental right in - procedural limits in competition limits on how
the EU Charter of investigations; and competition law can
Fundamental Rights - limits on the substance of be applied
competition law measures
Special status of data Positive duty to promote the Take proactive
protection as a application of the right to data measures on the basis
fundamental right in protection: of competition law to
the EU Charter of Scenario 1: no economic efficiency guarantee the
Fundamental Rights concern found - legally impossible effectiveness of the
and undesirable to promote data right to data
protection on the basis of protection
competition law
Scenario 2: economic efficiency
concern found - promote data
protection when taking
competition law measures

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WIDER RELEVANCE OF THE ANALYSIS - The proposed three-layer approach may not only have
relevance for the right to data protection but also for the other fundamental rights contained in
the EU Charter of Fundamental Rights. In this regard, data protection may form a case study of
how the European Commission and national competition authorities can take the protection of
fundamental rights into consideration when enforcing EU competition law. Even though the
Commission and the Court of Justice have until now been unwilling to do so, the EU Charter
provides these institutions with the opportunity to take a more coherent approach towards the
protection of the interests of individuals by creating room for the integration of fundamental
rights in EU policies including competition law. Considering the elevation of the EU Charter to a
source of primary EU law with the entry into force of the Lisbon Treaty, one could argue that the
EU institutions do not only have the ability but even a legally binding obligation to promote the
application of the fundamental rights contained in the EU Charter when acting in the field of EU
competition law.

6 Outlook
INCREASING POLITICAL PRESSURE - The fact that the European Commission and the EU Courts
have so far been unwilling to make use of the available means to adequately adapt the
application of competition law to the realities of online and, more generally, dynamic markets is
especially problematic in a time where competition enforcement in this sector is experiencing
increasing political pressure. In the context of the Google investigation, reference can be made to
the resolution on the Digital Single Market that the European Parliament adopted in November
2014 calling upon the Commission ‘to enforce EU competition rules decisively’ and ‘to consider
proposals aimed at unbundling search engines from other commercial services’.12 In addition,
within the framework of the Digital Single Market Strategy of the Commission, the introduction
of regulation for online platforms beyond the application of competition law in specific cases has
been considered.13

ATTENTION FOR POSSIBLE LONG-TERM EFFECTS - Against this background, the need for
competition authorities and courts to use existing competition concepts and tools in a way
conforming to the demands of new market developments seems pressing. More transparency
about how competition law is applied could help making politicians and policymakers aware of
the trade-off that has to be made when deciding whether or not to intervene in a particular
market. Even though regulation may increase competition and innovation in the short term,
possible economic effects on the long term should also be considered. Since politicians and
policymakers are inherently more incentivised to address short term concerns leading to

12
European Parliament resolution of 27 November 2014 on supporting consumer rights in the digital single market,
2014/2973(RSP), par. 15, available at http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-
//EP//TEXT+TA+P8-TA-2014-0071+0+DOC+XML+V0//EN.
13
See the Communication from the Commission to the European Parliament, the Council, the European Economic
and Social Committee and the Committee of the Regions, Online Platforms and the Digital Single Market -
Opportunities and Challenges for Europe, COM(2016) 288 final, 25 May 2016.

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observable results more quickly, it is all the more important to raise attention for how a
regulatory intervention may negatively affect the innovation incentives of the targeted
incumbents as well as of other market players in the long term. The analysis involving the
economic trade-off between competition for and competition in the market in essential facilities
cases can thereby also provide input for the broader policy debate on openness in digital markets
in general.

NEED FOR A BROADER FORM OF PROTECTION - With regard to the integration of data protection
interests in competition cases, it would be beneficial for the democratic legitimacy of
competition enforcement to give more consideration to data protection in competition analysis.
By going beyond strictly protecting economic efficiency concerns, criticisms can be addressed
that competition law ignores other dimensions of consumer welfare. In addition, such an
approach would give consumers a more integrated form of protection in a time where there is a
need for a coherent enforcement of EU law. Competition authorities and courts should be
prepared to tackle mergers and behaviour of market players that transcend narrow relevant
product markets and blur the boundaries between distinct legal fields. A more dynamic
competition analysis and a wider interpretation of the scope of protection offered by the
competition rules is vital to adequately protect the interests of consumers in the digital economy.

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